Block Stock Down 13.6% Since Q2 Report, Mizuho Analyst Maintains Strong Buy Rating

Mizuho's Dan Dolev raised their price target on Block (NYSE: SQ) by 5.9% from $85 to $90 on August 7, 2023. The analyst maintained their Strong Buy rating on the stock.

Assessing Block's Q2 2023 earnings report, released on August 3, 2023, Dolev argued that management's revised gross profit and operating expenditure guidance suggest a minimum of $1.6B in FY 2023 Adjusted EBITDA, which is 7% higher than the $1.5B EBITDA management forecasted. Their bullish EBITDA view accounts for their increased price target, the analyst added.

"While "$1.6B is probably the bare minimum," Dolev said that any further gains from higher-than-expected profits should show up in EBITDA right away, indicating that there is room for growth beyond that."

For Q2 2023, Block reported earnings per share (EPS) of $0.39, beating the Zacks Consensus Estimate by 11.4% and showing a 116.7% increase compared to Q2 2022's $0.18. The company's revenue for the same period reached $5.535B, surpassing the Zacks Consensus Estimate by 8.9% and showing a 25.7% increase compared to Q2 2022's $4.405B.

In terms of guidance for FY 2023, Block's management projected an adjusted EBITDA of $1.5B, up from the previous guidance of $1.36B. They also revised the adjusted operating income guidance from $(115M) to $25M. In their Shareholder Letter, management emphasized their focus on four strategic priorities: enabling omnichannel, growing upmarket, expanding globally, and integrating generative artificial intelligence.

Block Incorporated's platforms enable sellers to accept credit card payments. The company offers reporting, analytics, and next-day settlement services. Their hardware products include various readers for accepting payments, and they also provide Cash App, a platform for sending, spending, and storing money, as well as Afterpay, a buy-now-pay-later solution. Weebly, another product offered by Block, provides website hosting and domain name registration services. Furthermore, the company offers a developer platform with application programming interfaces and software development kits. Formerly known as Square, Inc., Block, Inc. was incorporated in 2009 and is based in San Francisco, CA.

On the same day as the price target increase for Block, the analyst also raised their price target on Robinhood Markets Inc by 7.1%, from $14 to $15, and maintained their Strong Buy rating.

According to the latest data, 100% of top-rated analysts currently rate Block as a Strong Buy or Buy, with no analysts considering it a Hold, and no analysts recommending selling the stock.

Since Block's latest quarterly report on August 3, 2023, the stock price has experienced a 13.6% decline. Year-over-year, the stock is down 29.2%. During that period, Block is trailing the S&P 500, which is down 8.8%.

Mizuho analyst Dan Dolev, who raised the price target on Block, is ranked in the bottom 1% out of 4,290 Wall Street analysts by WallStreetZen. Dolev specializes in the Technology and Basic Materials sectors, among others. Their average return is -15.5%, and they have a win rate of 42.2%.

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